China policy round-up: Pompeo, Trump threaten Beijing over HK security law, USD/CNH surges
In this round-up, tensions between the US and China rise dramatically after China says it would impose a national security law on Hong Kong SAR, and the USD/CNH exchange rate reacts strongly to the latest developments.
Michael Pompeo, US secretary of state, said in a Wednesday statement that he no longer considers Hong Kong autonomous from China.
“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” he said.
Following Pompeo’s statement, the offshore renminbi (CNH) fell to mid 7.18 against the dollar on Thursday and briefly to 7.1965, “retesting its record low of 7.1965 in September 2019”, according to Ken Cheung Kin Tai, chief Asia FX strategist at Mizuho Bank. He added that the risks of a “new cold war” between China and the US could potentially force the renminbi to fall beyond the 7.2 level.
China’s National People’s Congress (NPC) passed the motion to establish a national security law for Hong Kong on Thursday Beijing time. The NPC voted 2,878 to one in favour of the bill with six abstentions.
US president Donald Trump said he would announce new policies on China on Friday. “We’ll be announcing what we’re doing tomorrow with respect to China,” Trump told reporters on Thursday. “And we are not happy with China. We are not happy with what’s happened.”
Zhong Shan, minster of commerce, said China has provided Covid-19 related medical supplies free to over 150 counties.
He also said the country will open up further, shorten the negative list for investment, implement foreign investment law and protect the rights and interests of foreign enterprises in China.
A Canadian court rejected an attempt by Meng Wanzhou, the chief financial officer of Huawei Technologies, to dismiss her extradition request on Wednesday. The decision effectively allows the process for extraditing Meng to the US to continue.
Meng has been on house arrest in Vancouver since December 2018. She faces alleged fraud charges related to US sanctions against Iran.